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LUXURY MARKET
China Retail Snapshot Asia Distribution and Retail April 2016
Note: Photos in this report are from official websites and official social media accounts, and freepik, if not otherwise specified.
EXECUTIVE SUMMARY
SUMMARY
Luxury’s sales down 2% yoy to 113 brillion yuan Negative growth for 2nd year in a row
Slowdown in economic growth
Chinese government’s ongoing campaign against
corruption and extravagant spending
Majority of luxury purchases by Chinese consumers were
made overseas
MAJOR TRENDS AND DEVELOPMENTS OF CHINA’S LUXURY MARKET
SUMMARY
1 Luxury products for children become new growth point
2 Women and millennials are the leads in China’s luxury market
3 Chinese luxury shoppers prefer spending abroad
4 Demand for “diagou” services wanes on increasing popularity of online shopping
5 Chinese luxury shoppers in pursuit of luxury “experience”
6 Chinese government is eager to boost domestic luxury sales
COMPETITIVE LANDSCAPE AND STRATEGIES OF LUXURY PLAYERS IN CHINA
SUMMARY
1 Leveraging digital media to roll out marketing campaigns
2 Revising store-opening strategies
3 Launching China-themed products and tailor-made services for Chinese customers
4 Expanding into F&B, real estate and beauty sectors
5 Reaching out to online luxury shoppers
CHINA LUXURY MARKET POSTED NEGATIVE GROWTH FOR 2ND YEAR IN A ROW
• Global luxury spending reached over 250 billion euros in 2015, an increase of 13% form 2014; yet, the real growth moderated to only 1% to 2%, signaling a lower sales growth in the global luxury market.
• In China, the growth of luxury sales contracted by 2% to 113 billion yuan in 2015, a negative growth for the second year in a row
• The contraction is attributed chiefly to the continuing government efforts to rein in extravagant spending and economic slowdown, coupled with a drop in yuan as well as the stock market crash in 3Q15.
Source: “2015 China Luxury Market Study.” 20 January, 2016. Bain & Company
OVERVIEW
116
115
113
2%
-1%
-2%
-3%
-2%
-1%
0%
1%
2%
3%
111.5112
112.5113
113.5114
114.5115
115.5116
116.5
2013 2014 2015
sales (billion yuan) yoy growth
Mainland China luxury sales, 2013-2015
218 224
253
7%
3%
1-2%
3% 3%
13%
0%
2%
4%
6%
8%
10%
12%
14%
200
210
220
230
240
250
260
2013 2014 2015
sales (billion euros)
yoy growth at constant exchange rate
yoy growth at current exchange rate
Global luxury sales, 2013-2015
Source: “Luxury Goods Worldwide Market Study.” 21 December, 2015. Bain & Company
• Albeit a dip in luxury spending, China is still a major powerhouse of global luxury growth.
• According to Bain & Company, Chinese consumers remained the world’s largest consumer of luxury goods and accounted for about 31% of global luxury purchases in 2015, ahead of the Americans (24%), and Europeans (18%).
• China was also the fourth largest luxury goods market in 2015, taking up 7% global luxury sales, just behind Europe, the U.S. and Japan.
• Meanwhile, Chinese shoppers continued to spend far more abroad than in their home country in 2015, with over 70% of their luxury purchases made overseas, especially in Europe, owing to the devaluation of the euro which created temporary favourable price gaps for Chinese luxury shoppers.
5%
7%
8%
13%
33%
34%
Rest of World
China
Japan
Rest of Asia
Europe
Amercia
0% 10% 20% 30% 40%
CHINA’S LUXURY SPENDING REMAINS A KEY DRIVER OF GLOBAL LUXURY MARKET
OVERVIEW
Rest of world 17%
Chinese 31%
Japanese 10%
American 24%
European 18%
Source: “Altagamma 2015 Worldwide Markets Monitor.” 29 October, 2015. Bain & Company and Fondazione Altagamma.
Global luxury sales by consumer nationality, 2015 Global luxury sales by region, 2015
4th
1st
• Among the major luxury product categories, the growth rates of women’s apparel, jewellery, cosmetics, perfume and personal care products were more resilient in 2015, up by 10% yoy, 7% yoy and 5% yoy respectively in 2015. However, sales of men’s apparel and watches recorded negative growth rates of -12% and -10% respectively.
Compound annual growth rate
2012-2013
2013-2014
2014-2015 (est.)
Cosmetics, perfume and personal care products 10% 7% 5%
Watches -11% -13% -10%
Leather goods 5% 0% -5%
Men's apparel -1% -10% -12%
Jewelry 5% 2% 7%
Women's apparel 10% 11% 10%
Shoes 8% 8% 2%
Accessories 8% 0% -6%
Total 2% -1% -2%
SALES OF MEN’S APPAREL AND WATCHES TUMBLED, WHILE WOMEN’S APPAREL SHOWED STRONG MOMENTUM
OVERVIEW
Source: “2015 China Luxury Market Study.” 20 January, 2016. Bain & Company
Market share of China’s luxury growth rates by category, 2015
SALES OF MEN’S APPAREL AND WATCHES TUMBLED, WHILE WOMEN’S APPAREL SHOWED STRONG MOMENTUM
OVERVIEW
Market share of China’s luxury market
Source: “2015 China Luxury Market Study.” 20 January, 2016. Bain & Company
Cosmetics, perfume and personal care
products
Watches
Leather goods
Men's apparel
Jewelry
Women's apparel
Shoes
Accessories
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Luxury sales by category
LUXURY CONSUMER PRICE POSTED NEGATIVE GROWTH FOR FIRST TIME IN NINE YEARS
• Hurun’s China luxury consumer price index (LCPI), which measures the price increase in selected luxury products in China, dropped 1.8% yoy in 2015, the first negative growth since the debut of the index in 2007. Moreover, the LCPI was lower than the consumer price index in 2015, indicating weaker demand for luxury goods in China.
OVERVIEW
Source: “Luxury Consumer Price Index 2015.” 28 July, 2015. Hurun.
4.4%
7.1%
-1.7%
2.9%
6.4%
2.2%
2.7%
2.5%
1.4%
8.7%
12.6%
4.6%
11.3%
7.7%
4.9%
1.5%
4.0%
-1.8%
-4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%
2007
2008
2009
2010
2011
2012
2013
2014
2015
Luxury Consumer Price Index Consumer Price Index
Annual changes in luxury consumer price index and consumer price index in China, 2007-2015
A NUMBER OF LEADING LUXURY PLAYERS RECORDED STAGNATED SALES GROWTH IN 2015
• The past few years have proved to be hard for many luxury players in China. The ongoing anti-corruption campaign and economic slowdown have dented the extravagant spending of Chinese consumers, thereby clouding the outlook for luxury brands.
OVERVIEW
Source: Companies’ official websites; compiled by the Fung Business Intelligence Centre.
Performance of selected luxury retailers in 2015
Brand Performance in 2015
Impeded by the economic slowdown in China, the company recorded a 4% yoy revenue decline in Asia-Pacific region (excluding Japan) at current exchange rates and a 16% yoy decrease at constant exchange rates in fiscal year 2015. The company recorded sales growth in all global regions with the exception of Asia. Sales in China, Hong Kong and Japan also posted negative growth. The silk and textiles sector of the company posted negative growth in 2015 as a result of slowing sales in Greater China as well as the year-end terrorist attack in France.
The company’s wine and spirits business performed well in the U.S. and Japan. However, the continued destocking by distributors in China weighed on its sales of higher-grade cognac, especially in the first half of 2015.
CHINESE CONSUMERS SHOW INCREASING PREFERENCE FOR CROSS-BORDER ONLINE SHOPPING
• Cross-border online shopping is taking off among Chinese consumers. In 2015, the Chinese made around 12% of their total luxury purchases via cross-border e-commerce websites*.
• The growth in cross-border e-commerce shopping was mainly driven by an increase in the number of cross-border e-commerce shopping websites as well as a wider acceptance of payment methods commonly used by Chinese consumers such as UnionPay and Alipay. According to the Ministry of Commerce, China currently has around 200,000 foreign trading companies using more than 5,000 cross-border e-commerce platforms to carry out businesses in China, with the majority of companies engaged in personal electronics, fashion and accessories businesses**.
• In the 1Q15, total cross-border e-commerce transactions in China surpassed 2 trillion yuan, a leap of 42.8% yoy. The transaction value of cross-border e-commerce is projected to take up about 20% of the country’s total import and export value in 2016, surging more than 30% yoy.
OVERVIEW
*“2015 China Luxury Market Study.” 20 January, 2016. Bain & Company. **“Cross-border e-commerce to boost foreign trade for China.” 16 January, 2016. China Daily. http://www.chinadaily.com.cn/opinion/2016-01/16/content_23114000_2.htm
CHINESE TRAVELLERS LEAD THE WORLD IN TAX-FREE SHOPPING
• Chinese travellers took the top spot in global tax-free shopping in 2015 and accounted for 30% of the world’s total duty-free sales, ahead of the Middle Eastern, Russian, American and Indonesian travellers, according to Global Blue*.
• Thanks to weak euro and high tariffs on imported goods in their home country, Chinese travellers spent 16% more on tax-free shoppers in 2015 compared with 2014. Chinese tax-free shopping burgeoned in 1Q15, reaching an apex of 122% yoy growth in March 2015 and a 89% yoy growth in June 2015. The Eurozone also witnessed a 75% yoy upsurge in Chinese spending in 1Q15**.
OVERVIEW
*“Global Blue December data: top five globe shopper spending patterns.” 27 January, 2016. Global Blue. http://corporate.globalblue.com/press-centre/global-blue-december-data-top-five-globe-shopper-spending-patterns/ **“Chinese travellers are key to ‘sixth continent’ of duty-free shoppers.” 3 February, 2016. Jing Daily. https://jingdaily.com/chinese-travelers-are-key-to-sixth-continent-of-duty-free-shoppers/#.VspbHpBungA
RAPID GROWTH IN HOUSEHOLD DISPOSABLE INCOME
• Household disposable income in China has grown continually over the years. According to the National Bureau of Statistics (NBS), middle income, upper middle income and highest income segments all registered strong growth at annual growth rate of 10.2% yoy, 9.3% yoy and 6.7% yoy respectively in 2015. These groups of individuals often have a voracious appetite for luxury goods and are the biggest spenders on luxury products.
OVERVIEW
Source: “China Statistical Yearbook 2015.” September, 2015. National Bureau of Statistics of China
11,219.30
19,650.50
26,650.60
35,631.20
61,615.00
13.4%
11.5%
10.2%
9.3%
6.7%
0.00
10,000.00
20,000.00
30,000.00
40,000.00
50,000.00
60,000.00
70,000.00
Low Lower Middle Middle Upper Middle High
Yu
an
Urban household disposable income per capita by income group, 2015
NUMBER OF WEALTHY INDIVIDUALS BALLOONS, HITTING RECORD-HIGH SINCE 2010
• According to Hurun Wealth Report 2015, there were 1.21 million millionaires and 78,000 super-rich individuals in China as of May 2015, surging by 11% yoy and 16% yoy respectively, an all-time high since 2010.
• The growth rates were much faster in 2015, due chiefly to the burgeoning stock market in China in 1H15. Among all the regions, Beijing had the highest number of millionaires in 2015, followed by Guangdong, Shanghai, Zhejiang and Jiangsu.
OVERVIEW
Source: “2015 Wealth Report.” December, 2015. Hurun.
Number of millionaires and super-rich individuals in China, 2010-2015
875,000 960,000
1,020,000 1,050,000 1,090,000
1,210,000
55,000 60,000 63,500 64,500 67,000 78,000
6.1%
9.7%
6.3%
2.5% 3.80%
11.00%
7.8% 9.1%
5.8%
1.6%
3.9%
16.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
2010 2011 2012 2013 2014 2015
The number of millionaiers The number of the super-rich
yoy growth rate of millionaiers yoy growth rate of the super-rich
TREND #1 LUXURY PRODUCTS FOR CHILDREN BECOME NEW GROWTH POINT
• The introduction of the “two-child policy” starting 1 January 2016 is set to provide growth momentum for Children’s luxury products in China.
• According to Credit Suisse, the new policy will bring about three to six million additional babies per year in China, a population boost of 17% to 33% from the current 16.5 million new-born babies per year. The new born boost is estimated to bring an additional consumption of 120 million to 240 million yuan per year from 2017, around 4% to 9% of total retail sales in China*.
• To grip a larger market share in the lucrative market, some luxury brands have enriched their children’s wear product offering, while others have enhanced their marketing efforts by sponsoring popular TV shows.
TRENDS
*“Lonely child got company: Abandon one-child policy, 17-33% demand increase from new born boost.” 30 October, 2015. Credit Suisse. **“Designer brands for children.” 20 July, 2015. China Daily. http://europe.chinadaily.com.cn/business/2015-07/20/content_21328783.htm ***“Designer brands for children.” 20 July, 2015. China Daily. http://europe.chinadaily.com.cn/business/2015-07/20/content_21328783.htm
Italian fashion house Salvatore Ferragamo has recently launched a mini-selection of girls' shoes in two classic ladies' designs in Shanghai**.
American luxury retailer Ralph Lauren has invited Angela Wang, the daughter of a celebrity couple in China, who gained fame in a Chinese reality TV show “Where are we going, Dad?”, to take part in the Fall 2014 Ralph Lauren Children's Runway Show in New York***.
TREND #2 WOMEN AND MILLENNIALS ARE THE LEADS IN CHINA’S LUXURY MARKET
• The government’s clampdown on lavish personal spending and excessive gift-giving by officials have significantly impacted the luxury spending on men’s apparel and watch items over recent years, paving the way for the financially independent female consumers to pick up the slack in luxury spending in China.
• Dominated by female luxury shoppers, a number of categories, including women’s apparel, jewellery, cosmetics, perfume and personal care products contributed almost 50% of total luxury spending and registered robust growth between 2013 and 2015 albeit the ongoing anti-corruption drive, according to Bain & Company.
• According to a report by Gfk*, a total of 109 million Chinese travelled overseas in 2015, spending about 1.5 trillion yuan. Half of China’s outbound travellers are aged 15-29 years old - the millennials, while over 37% are aged 30-44 and 10% are 45-59.
• The report also shows that 66% of Chinese millennials belong to the high income bracket. Compared with their predecessors aged 50 and above, these young and wealthy consumers are more willing to spend money to indulge and pamper themselves; they are also less price sensitive and becoming the biggest purchasers of luxury goods in Asia Pacific.
TRENDS
*“Chinese tourists spend 229 billion USD in 2015.” 14 January, 2016. Gfk. http://www.gfk.com/insights/press-release/chinese-tourists-spend-229-billion-usd-in-2015/
TREND #3 CHINESE LUXURY SHOPPERS PREFER SPENDING ABROAD
• Chinese tourists have taken more shopping trips overseas in recent years.
TRENDS
*“Chinese visitors to Britain soars by 28% in first half of 2015.” 12 January, 2016. China Daily Europe. http://europe.chinadaily.com.cn/world/2016-01/12/content_23054204.htm **“Number of Chinese tourists to France expected to reach 2 million.” 30 November, 2015. China National Tourism Administration. http://www.cnta.gov.cn/xxfb/jdxwnew2/201511/t20151130_753647.shtml
• 185,000 in 2014 vs 89,000 in
2009
• 90,000 in 1H15, up 28% yoy
Number of Chinese visitor going to the U.K.* and France**
• Up 60% yoy in January to
October 2015
TREND #3 CHINESE LUXURY SHOPPERS PREFER SPENDING ABROAD (CONT’D)
• The boom in Chinese tourist arrivals is partly attributed to the relaxation of visa rules in some countries.
• In addition, depreciation of euro and Japanese yen has also created favourable exchange rates for yuan, thereby prompting more Chinese tourists to take shopping trips abroad.
TRENDS
*“U.K. to relax certain visa rules for Chinese tourists, will help luxury retailers.” 21 October, 2015 http://www.wsj.com/articles/u-k-to-relax-certain-visa-rules-for-chinese-tourists-1445423832 **“Visa policies are relaxed for visitors from China.” 2 July, 2015. The State Council of China. http://english.gov.cn/news/international_exchanges/2015/07/02/content_281475138828778.htm
Relaxation of visa rules by the U.K. government
Extended the pilot scheme which allows Chinese tour operators to use the European Schengen form to also apply for UK visas
Lowered the price of a multiple-entry two-
year visitor visa for Chinese tourists to 85 pound from the previous 324 pound*.
Measures by the French government to streamline visa application process for Chinese tourists
To offer more multiple-entry visas valid for five years
To establish visa-processing agencies in China outside of its embassies or consulates in the country**.
TREND #4 DEMAND FOR “DIAGOU” SERVICES WANES AMID THE INCREASING POPULARITY OF ONLINE SHOPPING
• Online luxury sales have been growing rapidly in China at the expense of “diagou” services. With increasing confidence in online shopping, Chinese luxury shoppers are now more attracted to cross-border e-commerce websites than “diagou” services when it comes to purchasing luxury products.
• A report by KPMG* in 2015 suggested that 45% of luxury shoppers in China purchased over half of their luxury goods online, up 28% versus 2014. Moreover, 75% to 95% of respondents showed a willingness to buy most of luxury categories online, including apparel, leather goods, cosmetics, jewellery, watch and wine.
• The product authenticity guarantees provided by cross-border shopping websites have also given diagou merchants the cold shoulder as authenticity is not always guaranteed when transactions are made with unauthorized sellers.
TRENDS
*“China’s Connected Consumers – When 10,000 Chinese Shop… Insights from a 2015 Survey.” July, 2015. KPMG.
TREND #4 DEMAND FOR “DIAGOU” SERVICES WANES AMID THE INCREASING POPULARITY OF ONLINE SHOPPING (CONT’D)
• The import tax reductions coupled with luxury retailers’ moves to realign prices between overseas and China have also dented the demand for diagou services.
TRENDS
*“2015 China Luxury Market Study.” 20 January, 2016. Bain & Company. **“Chanel to slash prices in China; a way out for online luxury retailers?” 20 March, 2015. iResearch. http://news.iresearch.cn/content/2015/03/247813.shtml ***“Chanel’s China price outs: Should other luxury brands do the same?” 20 May, 2015. Jing Daily. https://jingdaily.com/chanels-china-price-cuts-should-other-luxury-brands-do-the-same/
With effect from 1 January 2016, the tariffs for some imported daily consumer goods, including bags, suitcases, apparel, scarves, blankets and sunglasses have been reduced moderately.
The import taxes for some clothing, footwear and suitcase items have been lowered to 8% from 16%, 12% from 24% and 10% from 20% respectively*.
Some luxury retailers have closed their retail pricing gaps between the European and Asia markets by lowering prices in Europe and raising prices in Asia.
French luxury brand Chanel announced in March 2015 that the company would raise prices in Europe by 20% while slashing prices in China starting April 2015 to make prices more equal globally**.
LVMH’s watch division Tag Heuer, luxury fashion housues Dior and Prada also made similar pricing adjustments following Chanel’s move***.
TREND #5 CHINESE LUXURY SHOPPERS IN PURSUIT OF LUXURY “EXPERIENCE”
• With increasing exposure to luxury goods and services through different media channels, Chinese consumers have been drifting toward experiencing luxury and away from simply owning a luxury product.
TRENDS
Overseas trips
Restaurant bookings
Beauty treatments
Car rental services
Hotel reservations
Investment services
TREND #6 CHINESE GOVERNMENT IS EAGER TO BOOST DOMESTIC LUXURY SALES
STRATEGIES
• Facing lofty tariffs on luxury items in their home country, Chinese consumers have held back their luxury spending in China and continued to do most of their luxury shopping abroad.
• Recognising domestic luxury sales are losing to overseas countries, particularly the rapidly growing duty-free businesses around the world, the Chinese government has introduced a number of policies to address the issue.
*“Hainan duty free hits $842m as allowance doubles.” 31 January, 2016. The Travel Retail Business. http://www.trbusiness.com/regional-news/asia-pacific/hainan-duty-free-842m-as-allowance-doubles/100793 **“2015 China Luxury Market Study.” 20 January, 2016. Bain & Company.
The Chinese government announced in January 2016 that it will double the duty-free allowance to 16,000 yuan for mainland nationals at Duty Free Group’s shopping mall in Hainan*.
E.g. Doubling domestic duty-free allowance
With effect from 1 January 2016, the tariffs for some imported daily consumer goods, including bags, suitcases, apparel, scarves, blankets and sunglasses have been reduced moderately. The import taxes for some clothing, footwear and
suitcase items have been lowered to 8% from 16%, 12% from 24% and 10% from 20% respectively**.
E.g. Lowering import taxes for some daily consumer goods
STRATEGY #1 LEVERAGING DIGITAL MEDIA TO ROLL OUT MARKETING CAMPAIGNS
• Riding on the boom of the e-commerce sector in China, many luxury retailers in China are making huge digital marketing efforts to increase brand equity. One of the most commonly used digital marketing tools is WeChat, a text and voice messaging mobile app developed by Tencent. The total number of monthly active users of WeChat reached 650 million as at the end of September 2015, representing a yoy growth of 39%*.
• Given the large number of WeChat users in China and a strong engagement of Chinese consumers with digital media, many luxury retailers have been actively using it as a tool to promote their latest products and interact with their consumers. Apart from using WeChat, luxury retailers have also launched official websites in Chinese or used micro-blogging site Sina Weibo to interact with Chinese consumers.
STRATEGIES
*“Tencent announces 2015 third quarter results.” 10 November, 2015. Tencent. http://210.6.198.34/ich_flag/www.tencent.com/en-us/content/at/2015/attachments/20151110.pdf
Brand WeChat Sina Weibo Official website in China
Armani
Blancpain
Burberry
Bvlgari
Cartier
Chanel
Chaumet
Dior
Fendi
Gucci
Louis Vuitton
Montblanc
Piaget
Salvatore Ferragamo
Tiffany & Co
Versace
Ermenegildo Zegna
STRATEGY #1 LEVERAGING DIGITAL MEDIA TO ROLL OUT MARKETING CAMPAIGNS (CONT’D)
Types of digital media initiatives adopted by selected luxury brands
Source: Companies’ official websites; WeChat; Sina Weibo; compiled by the Fung Business Intelligence Centre
STRATEGIES
= Transactional
STRATEGY #2 REVISING STORE-OPENING STRATEGIES
• Slump in local demand as more Chinese luxury shoppers purchase abroad has caused a string of luxury shop closures in China. For example, Prada, Armani and Burberry respectively shuttered 16, five and four stores in China over the past two years*.
• In March 2016, Hugo Boss also announced to close 20 of its 145 stores in China and undergo extensive makeovers to the remaining stores in the country**.
• Louis Vuitton, which closed three of its stores in China in 2015***, is expected to shut more unprofitable stores across the country, the company has also announced plans to upgrade and relocate some of its current stores in China so as to optimise the quality of its store network****.
STRATEGIES
*“Just why are Louis Vuitton and other high-end retailers abandoning China.” 3 December, 2015. SCMP http://www.scmp.com/news/china/money-wealth/article/1886443/high-end-retailers-china-no-longer-have-luxury-time **“Hugo Boss to review store growth, close some outlets in China.” 10 March, 2016. The Irish Times. http://www.irishtimes.com/business/retail-and-services/hugo-boss-to-review-store-growth-close-some-outlets-in-china-1.2568189 ***“Is time running out for luxury in China?”25 January, 2016. CKGSB Knowledge. http://knowledge.ckgsb.edu.cn/2016/01/25/branding/is-time-running-out-for-luxury-in-china/ ****“Louis Vuitton struck by China’s luxury dip and shutters stores.” 17 November, 2016. Fashion United. https://fashionunited.uk/news/retail/louis-vuitton-struck-by-china-s-luxury-dip-and-shutters-stores/2015111718370
STRATEGY #3 LAUNCHING CHINA-THEMED PRODUCTS AND PROVIDING TAILOR-MADE SERVICES FOR CHINESE CUSTOMERS
• Considering Chinese consumers making a majority of their sales, global luxury retailers, not least in the U.S. and Europe, are exerting their efforts to woo affluent Chinese shoppers with China-themed products such as, zodiac-themed items, as well as providing tailor-made services and events for Chinese customers.
STRATEGIES
*“Department stores across global mark Chinese New Year with pop-ups and shopping peaks.” 25 January, 2016. Jing Daily. https://jingdaily.com/department-stores-across-globe-mark-chinese-new-year-with-pop-ups-and-shopping-perks/
U.S. upscale chain department store operator Bloomingdale launched a series of
services and products for Chinese consumers during the 2016 Lunar New Year Holiday
in February 2016*:
Mandarin-speaking customer services;
Art installations featuring the Lunar New Year;
The Year of Monkey special-edition tote bag;
Gift card prizes in red envelopes tailored to Chinese New year gift-giving traditions;
Simplified Chinese-language directories and shopping guidebooks
STRATEGY #3 LAUNCHING CHINA-THEMED PRODUCTS AND PROVIDING TAILOR-MADE SERVICES FOR CHINESE CUSTOMERS (CONT’D)
STRATEGIES
Source: Companies’ official websites; Internet sources; complied by Fung Business Intelligence Centre
The Year of Monkey special-edition product collections launched by selected luxury retailers
STRATEGY #4 EXPANDING INTO F&B, REAL ESTATE AND BEAUTY SECTORS
• To cash in on Chinese customers’ strong fascination towards high-quality services and products, luxury players have begun to expand beyond their core fashion businesses into F&B, beauty and real estate sectors in China.
STRATEGIES
*“Burberry opens debut beauty salons in Hong Kong and Shanghai” 4 August, 2015. Fashionmag.com. http://cn.fashionmag.com/news/burberry-bo-bai-li-mei-rong-zhuan-mai-dian-deng,557180.html#.VupwgUJ96Uk **“Luxury brands break into food business to reach China’s shoppers.” 30 July, 2015. Jing Daily. https://jingdaily.com/luxury-brands-break-into-food-business-to-reach-chinas-shoppers/ ***“The Armani Group works with Smart Hero Group for Beijing Development.” 6 July, 2015. Perspective. http://www.perspectiveglobal.com/architecture/the-armani-group-works-with-smart-hero-group-for-beijing-development/
Vivienne Westwood Café was unveiled at Shanghai’s K11 Art Mall in April 2015**
Burberry opened its first beauty salon – Burberry Beauty Box in China at Shanghai’s Grand Gateway in August 2015*
Armani has also paired up with China’s property developer Smart Hero Group to develop a luxury residential project in Beijing, scheduled for completion in 2017***
STRATEGY #5 REACHING OUT TO ONLINE LUXURY SHOPPERS
• As mentioned, Chinese shoppers are more willing to purchase luxury items online nowadays. KPMG estimated that the maximum amount Chinese consumers felt comfortable paying online for a single item was 4,200 yuan in 2015, up from 1,900 yuan in 2014.
• The growth in online spending by Chinese consumers has prompted global luxury brands to ramp up their online presence in China through setting up self-operated online stores and/or storefronts on local third-party platforms such as Tmall.com and JD.com.
STRATEGIES
Source: Companies’ official websites; FDKG; compiled by the Fung Business Intelligence Centre
Online stores of selected luxury brands in China
Luxury brand Online presence in China Piaget Self-operated online store
http://www.piaget.cn/
Cartier Self-operated online store http://www.cartier.cn/
Mont blanc Self-operated online store http://www.montblanc.cn/zh-
cn/home.html
Tag Heuer Announced in September 2015 to launch its first online store in China on JD.com
Van Cleef & Arpels Self-operated online store http://cn.vancleefarpels.com/cn/zh.html#home
Burberry Self-operated online store https://cn.burberry.com/
Online store on Tmall.com https://burberry.world.tmall.com/
Coach Online store on Tmall.com https://coach.world.tmall.com/
CONCLUSION CONCLUSION
China’s luxury market is expected to continue to face downward pressure in 2016 as Chinese luxury shoppers will continue to spend a majority of their purchases abroad. Nevertheless, with the Chinese government’s initiatives to support domestic duty-free shopping and lower import tariffs for selected high-demand consumer products, domestic luxury consumption still has huge development prospects over the coming years.
Chinese consumers are becoming more discerning and are looking for products that are of highest quality at the best prices. Global luxury retailers should constantly reinvent themselves and re-assess their strategies. To better suit the tastes and preferences of Chinese customers, luxury retailers should consider widening their product offerings and re-adjusting their pricing strategies in China.
Moreover, in today’s digital era, luxury retailers should put in place a comprehensive online and mobile strategy; they should also embrace the Internet and advanced technologies to provide a seamless shopping experience for customers.
Contacts
Asia Distribution and Retail
Teresa Lam
Vice President
Tel: (852) 2300 2466
Email: [email protected]
Tracy Chan
Senior Research Analyst
Tel: (852) 2300 2480
Email: [email protected]
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